Atos has 'learned lessons' from healthcare unit woes, says analyst

Atos Origin has “learned its lesson” and will stick to its core IT business following the cancellation of two NHS contracts to provide diagnostic services, analysts believe.

Tash Shifrin
August 7, 2007

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Atos Origin has “learned its lesson” and will stick to its core IT business following the cancellation of two NHS contracts to provide diagnostic services, analysts believe.

Last month the Department of Health axed the two five-year contracts, in a blow to Atos’s new Healthcare division. The DoH said “it became clear that Atos Healthcare was not in a position to meet the contractual conditions and establish services to the timescales agreed”.

Atos Healthcare was launched in June, bringing together the company’s IT and clinical services in a bid to strengthen its position as a supplier to the NHS and other health businesses.

But analysts had warned that the company might have overstretched itself, after one of the diagnostics contracts – a £257m five-year deal with the NHS in the North West – was suspended.

Ovum analyst Phil Codling described the loss of the two contracts as “a significant blow”, not least because of the DoH’s comments about the company’s ability to deliver the services.

He added: “The signs are, thankfully, that the company has learnt its lessons and will stick to IT-based and/or administrative health services (primarily around occupational health-related processes) in future, rather than actually trying to run medical procedures.”

In retrospect, the loss of the two diagnostic contracts could be “something of a blessing for everyone concerned that the DoH cancelled Atos's contract before it got into the actual running of the services”, he said.

Last week, Atos announced £290m of new UK contracts as it posted its half-year results. The company also announced that Philippe Germond would take over from Bernard Bourigeaud as chief executive in October.

Germond signalled at the results briefing that Atos had learned its lessons “and would not be signing any more diagnostics contracts”, Codling said.

Atos is desperate to lift its UK business after €378m (£255m) impairment charges on its UK and Italian operations contributed to full-year losses of €264m (£178m) in February.